Monthly Archives: May 2017

Be Careful What You Share


May 30, 2017

A southern tradition provides the fuel for this commentary. Picture an Intensive Care Unit waiting room at a hospital in the Deep South. This hospital is not in a major metropolitan area, but rather a southern town where everyone grew up within a thirty mile radius. Here there still exists a wonderful tradition of “sitting with the family” while a loved one goes through a medical procedure. No doubt variations of this type of family support occur all over the country, but southerners take it to a high level.

The scene involves a large waiting room equipped with bolted chairs set up as a series of “pods”. The walls are decorated with large flat screen TVs, much like a sports bar. Each TV is tuned to a different station, and all are turned to the same volume with no obvious mechanism to vary the sound, or turn the TV off.

As is my preference I sat in the waiting room with my eyes closed trying to sleep, and seeking to be as inconspicuous as is possible. Over the course of several days a pattern of human behavior reveals itself. Scores of people would descend into the waiting room looking for the person whose loved one was having a procedure. These were relatives and friends, all of whom were there to “sit with” the family. The pods became defined encampments for various clans. I somehow found myself aligned with what I will call the Prentiss Clan, as they were from a town called Prentiss.

Over the course of Daddy/Brother/ Cousin Ronnie’s by-pass surgery I learned more about his family than patient Ronnie probably cared that any outsider should know. If he is paranoid about identity theft, my now detailed knowledge of him and his family might push him over the edge. Intimate family details were shared as if everyone was in the privacy of their homes.  Other wannabee hospital tribes, should bear in mind that the waiting room of a hospital is not secure.

As day turned into night a second “shift” began to show up ready to share their information. The night crew arrived dressed in sweat pants and leisure wear. They were well equipped with pillows, sleeping bags, and food which would likely not have been approved by the hospital’s dietary experts. The pods transformed into encampments, with only the fire pit missing, and the free flow of family history continued. Common to all the discussions was the ongoing out pouring of personal family information.

Sitting with the family in times of need is an endearing tradition but in today’s age caution and care are essential when sharing information in public around strangers. People’s passwords often revolve around family history. This is the sort of information to keep well away from anyone whose trustworthiness is unknown.

Carl Gambrell


US Debt for Sale but at what Price?

United States National Debt

May 22, 2017

A major worry hanging over the markets is who will be the next buyer of U.S. debt. Over the last several years the Fed has been the largest buyer of U.S. treasuries providing liquidity to the financial system known as “quantitative easing”.  In fact, last year the Fed financed 40% of our country’s deficit via purchases of U.S. treasury securities and holds an estimated $2.5 trillion of U.S. treasuries, and a further $1.8 trillion in mortgage backed securities. Investors must be constantly vigilant when a single player dominates a market. So who will replace the Fed’s buying power if it chooses to walk away?

Over recent years the Fed has been the dominant force in the market, but has not behaved as an economic buyer of bonds. The Fed really did not care about price. Instead its focus was on how its actions would stimulate the economy. We have been through what amounts to an extraordinary period of market manipulation even though the U.S. treasury market is the largest, and most liquid, market in the world.

In contrast, other buyers do care about the price and earned rate of interest. Real investors want yield and the prospect of an uncertain move back to normal conditions is what bothers the market. What level of interest rates will bring real money back into the treasury market?  If 40% of last year’s debt was purchased by a non-interest rate driven buyer like the Fed what interest rate will be needed to attracted investors as the Fed steps away?

In addition to the concern about who will replace the Fed as a buyer, the markets are also worried about the additional trillions of dollars in debt that might be needed for infrastructure needs. Moreover, there is a further $10 trillion in potential debt that might be needed for Social Security and Medicare. Finally, we should not forget that tax relief for corporations and individuals could also put additional demands on financing.

Uncertainty is generally not a good thing for a market. The outlook for the U.S. debt market over the next 24 months, in terms of volume and price, is a major concern. If inflation stays muted perhaps investors will be willing buyers of government debt at current levels. If the economy accelerates and inflation heats up, higher returns might be warranted.

Carl Gambrell